Bitcoin Trading Tips: Important Things You Must Know Before Buying Bitcoin

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The cryptocurrency market is booming, and new cryptocurrencies are popping up every day. Suppose you're thinking about getting into the game of bitcoin trading. In that case, this article will teach you everything you need to know before buying bitcoin or other popular cryptocurrencies like Ethereum or Litecoin.

Let's take a look at these essentials.


1. Market capitalization

Market capitalization

Market capitalization is the total dollar value of all coins in circulation. It’s calculated by multiplying the price per coin times the circulating supply, which can be tricky because there are different ways to calculate it depending on how you define “circulation.”

In addition, when dealing with cryptocurrencies with low trading volumes and high volatility, small spreads between buy/sell prices may make executing trades difficult or impossible due to slippage. Bitcoin Trader could be the right platform for automated trading mode.


2. Trading volume

Bitcoin's high trading volume means that it is a liquid asset, making it relatively easy to buy and sell. This liquidity also ensures that the price of bitcoin remains stable most of the time.

However, when there is a large influx or outflow of buyers and sellers, the price can be affected significantly. For this reason, it is important to keep an eye on the news and global events to get a sense of how they may affect bitcoin's price.


3. Market trends

Market trends

Another important factor you should consider before buying or selling bitcoins is the market trend. Even though bitcoin's price remains relatively stable most of the time, it may experience sharp fluctuations from time to time.

Whatever your reason for trading bitcoin, be sure to keep an eye on global events and news related to this digital asset to get a sense of where its prices are heading next.


4. Taxes

If you plan on holding onto Bitcoin long term, it would be wise not to trade too frequently because this could result in paying higher taxes than necessary due to short-term capital gains tax rates that can sometimes exceed 15% if you often trade with bitcoins.

At least set aside any profits made every half year or so to account for taxes owed.


5. Safety

Safety

As with any investment, it is important to be aware of the risks involved in trading Bitcoin. One must do their research before buying into Bitcoin and other cryptocurrencies. It is also important to use a reputable exchange and wallet service provider. There have been several cases of theft and fraud involving Bitcoin and other cryptocurrencies.

While a peer-to-peer network protects Bitcoin's blockchain, it is important to do your due diligence and research before sending money. If you choose an untrustworthy service provider or platform, there may always be a risk of losing your investment.


The Bottom Line

Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a dispersed public ledger called a blockchain.

Bitcoin is unique because there are a finite number of them: 21 million. When you're starting with crypto investment, make sure to keep in mind the above aspects for more effective and safer transactions.

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